Reference no: EM133632116

Problem

Students must create an Excel file to answer these problems - use the textbook as a guide. Show your work for 60% credit and 40% credit for the correct answer.

Use the correct heading and format for the problem assigned. Create one workbook with a worksheet for each question.

Question I. A company sells small motors as a component part to automobiles. The Model 101 motor sells for $850 and has per-unit variable costs of $400 associated with its production. The company has fixed expenses of $90,000 per month. In August, the company sold 425 of the Model 101 motors.

1. Calculate the contribution margin per unit for the Model 101.
2. Calculate the contribution margin ratio of the Model 101.
3. Prepare a contribution margin income statement for the month of August.

Question II. Fill in the missing amounts for the four companies. Each case is independent of the others. Assume that only one product is being sold by each company.

	Company A	Company B	Company C	Company D
Units Sold	600	?	?	900
Sales in Dollars	$ 30,000	$ 70,000	$ 240,000	?
Total Variable Expenses	$ 7,000	?	?	$ 144,000
Per Unit C/M	?	$ 80	$ 270	$ 140
Total Fixed Expenses	$ 20,000	$ 50,000	$ 145,000	?
Net Operating Income (Loss)	?	$ 6,000	$ (10,000)	$ (24,000)

Question III. Manatoah Manufacturing produces 3 models of window air conditioners: model 101, model 201, and model 301. The sales price and variable costs for these three models are as follows:

Product	Sales Price per Unit	Variable Cost per Unit
Model 101	$ 275	$ 185
Model 201	350	215
Model 301	400	245

The current product mix is 4:3:2. The three models share total fixed costs of $430,000.

1. Calculate the sales price per composite unit.
2. What is the contribution margin per composite unit?
3. Calculate Manatoah's break-even point in both dollars and units.
4. Using an income statement format, prove that this is the break-even point.

Question IV. Jakarta Company is a service firm with current service revenue of $400,000 and a 40% contribution margin. Its fixed costs are $80,000. Maldives Company has current sales of $6,610,000 and a 45% contribution margin. Its fixed costs are $1,800,000.

1. What is the margin of safety for Jakarta and Maldives?

2. Compare the margin of safety in dollars between the two companies. Which is stronger?

3. Compare the margin of safety in percentage between the two companies. Now, which one is stronger?

4. Compute the degree of operating leverage for both companies. Which company will benefit most from a 15% increase in sales? Explain why. Illustrate your findings in an Income Statement that is increased by 15%.